Premier's visit sign of close ties with region

08:16, June 26, 2012

The trip by Premier Wen Jiabao to Latin American countries is another clear indication that the close ties between the two will gather new steam, especially in trade and investment.

China and Latin America have both experienced high growth in the past decade and seen their trade and investment advance on a fast track.

In 2011, China's trade with Latin America jumped 31.5 percent over the previous year to $241.5 billion, making China the third-largest trade partner for the region after the United States and the European Union. China has become the largest trade partner for Brazil and Chile and the second-largest trade partner for Argentina, Mexico, Peru and Venezuela.

China also made a $10.1 billion non-financial investment in Latin America in 2011, making the region the second-largest destination for Chinese foreign direct investment. This has brought China's total non-financial investment in the region to $54 billion. In addition, China has signed free trade agreements with Chile, Peru and Costa Rica.

There is great trade potential for Latin America and Asia, particularly China, according to a joint report titled Shaping the Future of the Asia-Latin America and the Caribbean Relationship, released in April by the Asian Development Bank, the Asian Development Bank Institute and the Inter-American Development Bank.

IDB President Luis Moreno predicted last month that China may become the largest trade partner with Latin America within five years.

Shelly Shetty, director of Latin America Sovereigns at New York-based Fitch Ratings, said that the boom in China over the last decade has meant really good things for Latin America.

"Countries which export to China, such as Brazil, Chile, Peru and Uruguay and countries which receive China's loans, such as Venezuela and Ecuador, have clearly benefited," she said.

She said investment from China and increased trade have not only boosted growth in Latin America, but also helped strengthen the fiscal capacity of Latin American nations.

But she also said the effect has been uneven across the region. "It's great for resource-rich countries. It has been negative for countries which basically have to import food and soil and for countries which are competing with China in a third market, primarily in the United States," Shetty said at a seminar on Asia and Latin America held at the New York-based Asia Society.

Ann Lee, a senior fellow at the think tank Demos, said unlike the US, which has lent money to Latin America with conditions for human rights and democracy, China's lending with favorable rates in exchange for commodities and not interfering with Latin American countries' affairs has really resonated with a lot of countries there.

Lee, the author of What the US Can Learn from China, believes Latin American countries can learn from China's Five-Year Plans. "(Chinese and Latin American) trade reflects competitive advantages of the respective countries and other structural issues within Latin America that make it difficult for them to transfer away from its reliance on natural resources as an export. Long term, Latin America should develop other capabilities to avoid the infamous Dutch disease," Lee told China Daily.

So far, raw materials account for some 60 percent of Latin America's exports to China. But increasingly, Chinese manufacturing companies, such as telecom giants Huawei and ZTC, have poured investment across Latin America.

Chinese companies have also been building up their image across the region as good corporate citizens. During the recent Rio+20, the United Nations Conference on Sustainable Development, in Rio de Janeiro, Fu Chengyu, chairman of China Petrochemical Corp, discussed a corporate social responsibility report for Sinopec Brazil. The company has invested more than $12 billion in Brazil.

Zhang Mingde, professor of diplomatic policy at the Shanghai Institutes for International Studies, described the China-Latin America relationship as founded on mutual respect and interests. "China's growth in investment and trade in Latin America is organized entirely around the principles of cooperation, mutual benefit and common development," he wrote recently in an article.